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Bear of the Day: Lumentum (LITE)

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Lumentum Holdings (LITE - Free Report) is a $6 billion manufacturer of optical, photonic, laser, and nanoelectromechanical products and systems for end markets including communications, telecom, datacom and cloud/data center service providers.

Its Commercial Lasers segment products serve customers in manufacturing, biotechnology, graphics and imaging, and remote sensing and precision machining.

LITE became a Zacks #5 Rank after its Q3 FY21 reported in May. Wall Street analysts revised full year EPS estimates down 3% after some cloudy guidance from the company report. But they slashed FY22 (begins July) EPS by 18% from $6.85 to $5.63, which will represent a 9.6% annual drop.

Top-Line Q3 Details

As we reported In May, net revenues of $419.5 million fell short of the Zacks Consensus Estimate by 3.5%. However, the top line increased 4.1% from the year-ago quarter’s levels. The company deferred $14.8 million revenues due to delay in 5G deployments in China.

Optical Communications segment (92.5% of net revenues) revenues increased 8% year over year to $387.9 million. The segment’s performance reflected contribution from an extra week as well as strong revenue growth in the Industrial & Consumer segment.

Within the segment, Telecom & Datacom (66% of Optical revenues) revenues inched up 1.9% year over year to $255.8 million.

Strong sales of indium phosphide-based coherent components and modules contributed to the segment’s performance in the quarter under review. Strength in adoption of ROADM products as well as EML chips in the cloud data center market also drove the top line.

Nevertheless, management added that continued delays in 5G fronthaul deployments in China negatively impacted quarterly performance.

Industrial & Consumer (34% of Optical revenues) revenues climbed 22% year over year to $132.1 million driven by uptick in adoption of c and 3D sensing solutions.

Laser segment (7.5% of net revenues) revenues fell 27.4% to $31.6 million due to coronavirus crisis-induced macroeconomic slowdown.

After these results, the current revenue consensus for FY21 (ended June) is $1.73 billion for a modest 3.33% advance, and the coming year shows a zero growth forecast.

LITE is in a key place within the optical and laser markets. Buy until the estimates stop going down and start going back up, it may best to stay on the sidelines.

The Zacks Rank will let you know.

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